Where to invest with high equity prices

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Michael_00005
Posts: 130
Joined: Thu May 04, 2017 12:26 pm
Location: East coast USA

Where to invest with high equity prices

Post by Michael_00005 »

Anyone able to offer ideas on places to invest, if your mindset is that the equity market is too high in the US?

According to the Shiller PE ratio the US market is at it's 2nd highest point in history:

http://www.multpl.com/shiller-pe/

Some current areas of interest are REIT, and tickers: GOV and then VTIAX
Last edited by Michael_00005 on Thu Jul 06, 2017 10:22 am, edited 1 time in total.

Chad
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Re: Where to invest with high equity prices

Post by Chad »

Another viewpoint on overall market valuation using CAPE as part of the analysis:

http://www.realclearmarkets.com/article ... 02761.html

ThisDinosaur
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Re: Where to invest with high equity prices

Post by ThisDinosaur »

I have a data point in support of Chad's article and one that contradicts it.

First, vanguard thinks 10 year returns between -4% and 15% are consistent with current valuations.
https://personal.vanguard.com/pdf/s338.pdf

However, starcapital disagrees that you can out think CAPE10 by comparing it to other metrics.
http://www.starcapital.de/files/publika ... imling.pdf
From Page 4:
For each of these years, plausible reasons were given for why long-standing methods of evaluation should no longer apply...Investors who invested in these overvbaluations generally experienced real losses over periods of 10-20 years.

Chad
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Re: Where to invest with high equity prices

Post by Chad »

To be clear, I'm not arguing the market is over or under valued. I'm definitely not arguing that the market won't see a pullback. I'm just suggesting that using one data point, indicator, etc. is not the best way to gauge valuation.

Updated with Robert Shiller's own cautionary take on his on indicator:
The current level of CAPE suggests a dim outlook for the American stock market over the next 10 years or so, but it does not tell us for sure nor does it say when to expect a decline. As I said, CAPE is useful, but it does not provide a clear guide to the future.
https://www.nytimes.com/2017/03/31/upsh ... tocks.html

Michael_00005
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Location: East coast USA

Re: Where to invest with high equity prices

Post by Michael_00005 »

The market could charge forward for another year; I certainly don't have any special skills when it comes to investing, but feel risk vs. reward is heavy on the risk side now - for US stocks. So the preference is for lower risk assets, and then maybe that will change if there is a pull back.

These ratios were helpful

http://www.starcapital.de/research/stockmarketvaluation

ThisDinosaur
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Re: Where to invest with high equity prices

Post by ThisDinosaur »

Well, what do you mean by risk? People usually talk about investment risk being inversely related to expected return.

I've got probably-too-much money in emerging market equities. I think they're a good investment because they're undervalued. I believe the *reason* they're undervalued is because human loss aversion leads to markets overestimating the risk/return ratio. But if I'm wrong it will be an expensive mistake.

"Risk" in US markets right now means something different. If you buy the market now, you're essentially betting that expert forecasts and economic metrics are wrong. MrMoneyMustache and Bogleheads.com are full of people who would agree with you.

RealPerson
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Re: Where to invest with high equity prices

Post by RealPerson »

Still, with real estate in the stratosphere, the bond interest rate risk quite high and zero return for cash instruments, the question remains where to put your money. Even at today's rich market valuations, it seems that anything outside of the stock market is definitely not going to support a 4% withdrawal rate.

stayhigh
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Re: Where to invest with high equity prices

Post by stayhigh »

Michael_00005 wrote:
Thu Jul 06, 2017 9:09 am
Anyone able to offer ideas on places to invest, if your mindset is that the equity market is too high in the US?
Emerging markets and commodities seems to be reasonably priced just now.

Michael_00005
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Location: East coast USA

Re: Where to invest with high equity prices

Post by Michael_00005 »

ThisDinosaur wrote:
Thu Jul 06, 2017 1:33 pm
Well, what do you mean by risk?
Nothing technical, just a gut feeling of how much the market could produce or decline in a year. And if the decline potential feels greater than the potential gain then adjust the portfolio.

It sounds like there might be some potential in emerging markets, i'd have to research commodities - Vanguard has VMIAX.

Thanks

Dream of Freedom
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Re: Where to invest with high equity prices

Post by Dream of Freedom »

I am not a financial adviser and I don't play one on the internet, but I'll tell you what I've been buying. There has been a shift in money recently from secular names into growth stocks like amazon. This has created an opportunity in my opinion. I've made purchases of CAG, GIS, and SJM. They trade at fairly reasonable multiples for secular growth companies that rarely trade too low because of the stability they offer. Utilities like SO are on my radar too. Though not as much buying has been involved yet.

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Seppia
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Re: Where to invest with high equity prices

Post by Seppia »

Don't forget about old Europe.
The dollar is still fairly strong, and all metrics indicate European stocks are more fairly valued than American stocks.
They also underperformed the S&P by quite a bit in the last 20 years, which is another great sign for the next 20 (if you look at the veeeery long run, euro and us equities have returned almost the same)

I also have been thinking about commodities, first because all indexes are close to multi year lows, and recently I saw this:

Image

My question would be, what would the best instrument to buy a well diversified basket of commodities without suffering extreme issuer risk?

I've looked at
DBC - powershares db commodity index tracking fund - 0.89% TER
GSG - ishares s&p GSCI commodity indexed trust - 0.75% ter

Any recommendations?

stayhigh
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Re: Where to invest with high equity prices

Post by stayhigh »

Seppia wrote:
Sat Jul 08, 2017 11:21 am
My question would be, what would the best instrument to buy a well diversified basket of commodities without suffering extreme issuer risk?

I've looked at
DBC - powershares db commodity index tracking fund - 0.89% TER
GSG - ishares s&p GSCI commodity indexed trust - 0.75% ter

Any recommendations?
GSCI is focused mainly on energy, so I'd have a look there.

andystkilda
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Re: Where to invest with high equity prices

Post by andystkilda »

We've moved into more direct real estate ownership and peer-to-peer lending to search for better yeilds and subjective risk/reward ratio in the last few years.

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jennypenny
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Re: Where to invest with high equity prices

Post by jennypenny »

Some small cap funds are down YTD.

Dragline
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Re: Where to invest with high equity prices

Post by Dragline »

Energy, too. I've been accumulating some XLE and XOM this year.

Chad
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Re: Where to invest with high equity prices

Post by Chad »

Definitely energy. I'm keeping an eye one EOG, CDEV, and a few of the other top tier shale producers for another good entry point. I wonder if this time oil will bottom enough to washout a few of the less well run shale companies. I can't believe that OPEC will be able to get Libya and Iraq, and to a lesser extent Nigeria, to cut production.

http://www.cnbc.com/2017/06/13/opec-oil ... n-may.html

cmonkey
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Re: Where to invest with high equity prices

Post by cmonkey »

Telecom is also trailing for the last 12 months, down 18%.

Chad
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Re: Where to invest with high equity prices

Post by Chad »

Yeah, T just hit one of my alerts this morning.

Riggerjack
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Re: Where to invest with high equity prices

Post by Riggerjack »

Telecom is also trailing for the last 12 months, down 18%.
And if you are really brave/foolish look at FTR!

Farm_or
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Re: Where to invest with high equity prices

Post by Farm_or »

+1 on energy.

Telecom though, there are some good reasons that nobody is buying....

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